Bank Consultants - Friend or Foe?

Across the world, chief financial officers (CFOs) and treasurers are increasingly focused on achieving transformational changes in the finance function. These include maximising the use of shared service centres (SSCs) to drive down operational costs, increasing the level of self-funding in an uncertain credit environment, improving visibility and strengthening internal controls over risk exposures, enhancing support for in-country needs of business units around the world, and repositioning the treasury function to play a more strategic role in the business.

In the case of Western multinational corporations (MNCs), the treasury focus is on maximising efficiency to free up resources and enable the treasury to play a more strategic role within the business. This is prompting increased interest in more advanced and efficient treasury models like In-House Banks as well as treasury transformation and cash management redesign projects to drive increased business value and cost reduction.

Meanwhile, fast-globalising corporates from the emerging markets are looking to better support their businesses by leapfrogging directly to advanced treasury models rather than following the gradual evolution that their Western counterparts have taken. They are also implementing more sophisticated cash management structures including payment/collections centralisation via shared service centres (SSCs) and ‘against-the-sun’ pooling structures that bring back cash to their head office.

Against this backdrop, one of the biggest complaints that treasurers level against their bankers is that many are simply pitching products without understanding their broader treasury needs.

So, what steps are bankers taking to meet these broader needs?

Many of the larger international banks have responded to this challenge by establishing specialist teams that are able to offer holistic advice and solutions to corporates. Some banks take a relatively narrow approach with teams that support more complex cash management solutions. Others have a broader remit to provide advice on a range of treasury-related matters, such as best-practice risk management or even assist in the design and development of treasury centres and SSCs.

From the perspective of banks, specialist teams are a great way to understand the client’s business in more detail, foster better relationships, and ensure products and services are more closely aligned to client needs.

But are these consultants just an extension of the existing product-driven sales approach or a real source of competitive advantage for the treasurer?

The use of specialist consultants overcomes one of the inherent limitations of the traditional banking approach, which sometimes makes it difficult for banks to understand how things really work inside companies. By establishing these teams, banks can put themselves in the shoes of the treasurer to gain deeper insights into challenges faced by the client, and thus provide relevant solutions or alternative approaches.

Moreover, a strong understanding of the client’s specific pain points will allow banks to identify and leverage the best combination of products and services to support these solutions.

What should financial professionals look for in a bank?

Each bank will have a different model and its own distinctive strengths. Some may focus on providing broad based treasury advice whilst others may have a stronger orientation towards solution development.

Some large global banks have employed former treasurers and financial consultants, who have worked on both the buy and sell sides of the industry and led a variety of treasury and cash management projects. Other banks may favour experienced transaction bankers who have practical skills in areas such as implementation, technology and process improvement.

However, there are a few key factors that a treasurer can consider when choosing a bank to assist with strategic treasury management initiatives.

• Area of Expertise: What is the scope of advice you are seeking? Is it broad-based advice such as insights on market trends, or more specific advice relating to areas such as best practice liquidity management or business process improvement?
• Experience: What experience does the bank have advising and delivering outcomes in these areas? Do the individual consultants have a track record of delivering projects in these areas? Can they point to specific case studies or situations?
• Customer Focus: In your interaction with the bank, did its advisors take a client-centric view and focus on your problems or jump straight into a solution or product? Did they demonstrate knowledge and understanding of your internal processes and challenges?
• Capabilities and Footprint: Does the bank have the product capabilities and footprint to deliver on the solutions you are seeking? Can it leverage local expertise in your key markets to provide relevant insights on what other leading companies are doing?

Conclusion

Bank consultants can add significant value for corporates treasurers. Talking to someone who has ‘been there and done that’ can help treasurers drive transformational change in a shorter timeframe. Hence, treasurers should look to leverage these resources to develop potential solutions. The key is in understanding the capabilities and track record of each bank to identify and take advantage of relevant expertise.

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